UPI – Unified Payments Interface

India is going digital with various mediums and reforms being launched to make the country a cashless economy. One such digital advancement launched recently in India is the introduction of UPI. The UPI full form is Unified Payments Interface. This is a new mode of payment where one can actually send money from the smartphone at any point of time from any place. In a way, you can say that your smartphone also acts as a virtual mode of payment like a debit card. Another important fact is that you can use this app to send and receive funds in an instant.

The UPI app was launched in Jan 2016 and was adopted by only a handful of national banks initially. Within a span of a year, all banks realized the immense potential it holds and hence went ahead to launch their own version of the UPI app.

UPI is also known as the Unified Payment Interface and just like your email id, this can be taken as your financial address. Similar to your bank account, this remains unique to every individual and will help you to transfer and receive funds instantly using IMPS – Immediate Payments Service. So, now you do not need to transfer funds intrabank using old methods like NEFT, RTGS and cheque. Things will happen instantly all throughout the day even on holidays.

The UPI has been launched by the National Payments Corporation of India also known as the NPCI. In conjunction with the Reserve Bank of India and Indian Banks Association, NPCI has framed this network. It is similar in mechanisms like the RuPay system through which debit and credit cards function.

UPI is a digital mode that helps you transfer funds from one bank to another without using any account number, bank name, account type and IFSC. If you want to transfer funds using Internet banking then in most cases, the banks take some time to update the new beneficiary details. Such is not the case with UPI. Here, you can simply transfer anytime anywhere without adding any beneficiary or bank details.

The whole purpose of this app is to transact faster without going through the hassle of visiting the bank, standing in lines and filling up forms. Most of the banks have tied up with NPCI to offer this service to their customers. In order to transact using the app, you need to download the same and then register yourself and your bank details on to the app. The banks will ask you to create a Virtual Payment Address (VPA). You have to provide the first part of the VPA and the suffix is actually given by the bank. This handle is important as it serves to be your identity through which you can actually transfer or request funds.

You can use one app to link all your bank accounts with. That is not all, you can also use the app of a bank in which you do not hold an account if you find it simpler to use.

We refer to UPI as a smartphone-friendly application. Here are some interesting things that you should know about this payment interface that gives it an edge above others

In this payment gateway you can transfer funds between 2 banks using your smartphone

Users need to create a VPA- Virtual Payment Address or handle and link their bank accounts to it. This is almost like a financial address for them.

Just as you send an SMS, you can now send or receive money from one account to another.

You can avail the benefits of this app all-round the day. Even when RBI is closed.

This is a boon as you do not need to transact within banking hours anymore. This is possible as this App is based on IMPS that functions 24×7.

The current cap of transactions on this app is ₹ 1,00,000 subject to terms and conditions. This is under revision currently and soon the cap might be increased. Also, many of the banks have their internal caps also.

The app is highly encrypted and has the bandwidth to carry on various transactions at the same time. At present, it handles as much as ₹ 8,000 Crore equivalent transactions on a daily basis. Just as debit card transactions are secured with an OTP, a UPI app is also secured with an MPIN. The transaction is secured with a 4-digit UPI Pin.

As of now, there is no fee charged on UPI transactions. Earlier, there was a nominal charge for using UPI. NCPI had fixed ₹ 0.50 per transaction. However, the government has removed all charges to promote digital transactions. Many banks want to promote this app and hence do not want to charge anything to the users as a promotional feature. However, these may change from time to time. There are no charges to download the UPI-based app from online platforms.

The whole concept of launching this app was to ensure that India moves towards a cashless economy. Since launch, it has been a huge hit amongst all the users thanks to it being convenient. Though, it cannot replace cards and cash immediately, but with time and added features, it can move towards that direction. Currently, a lot of users are using UPI as it is simple to use and convenient. Also, most of the banks are offering freebies and cash backs for using their app.

Use of the existing infrastructure ensures no additional cost is incurred by the bank

Single click with two-factor authentication

Benefits of UPI For Merchants

Seamless fund collection

Instant receipt of fund

No need for sharing bank details

No additional or operating cost as opposed to PoS machine

Suitable for e-commerce platforms

COD collection made easy with UPI payment

UPI Apps are the way to go. This feature is slowly gaining popularity and gradually people are migrating from an offline to an online mode of transacting. Banks are also happy with the success rate of this service and hence heavily investing in them. Most banks have rolled out offers like freebies and cashbacks to promote customers in downloading their app and using them.